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Company Law: Duties and Responsibilities of Directors under Corporation Act 2001

   

Added on  2023-06-13

14 Pages3967 Words70 Views
Running head: COMPANY LAW
Q & A
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Author Note

1COMPANY LAW
Table of Contents
Part B...............................................................................................................................................2
Question 1 (a)..............................................................................................................................2
Question 1 (b)..............................................................................................................................4
Question 2 (a)..............................................................................................................................6
Question 2 (b)..............................................................................................................................8
Reference:......................................................................................................................................11

2COMPANY LAW
Part B
Question 1 (a)
According to the Corporation Act 2001, the directors are playing an important role in a
company. It has been established in the case of Salomon v Salomon that company is a legal
person separate from the stakeholders. Therefore, it can be stated that the company will not be
held liable for the negligent act of the directors until the act has been performed for the interest
of the company. However, as the company could not act individually, directors are treated as the
mind of the company. The Corporation Act has imposed certain duties on the directors as they
are holding significant position in the company (Bottomley, Stephen 2016). There are certain
equitable obligations imposed on the directors under the Corporation Law that are comprised in
section 180 to section 183 of the Act. These duties are known as the fiduciary duty of the
director. The primary duty of the director is to stay loyal to the company and act in good faith.
They are restricted to act negatively or should not earn illegal profit by using their position
(Rajanayagam, Shawn, and Carolyn 2015). In Australia, the fiduciary duties of a director can be
divided into four parts such as act in good faith (section 181); not to use their position for
improper purpose (section 182); they should avoid thee conflict of interest (section 183) and they
are required to retain the discretion (section 184). However, all these provisions are mandatory in
nature and the directors are bound to abide by the provisions of the Act if wanted to continue
their business in the provinces of Australia.
Australia is a business country and Corporation Act plays an important role in Australia.
In today’s world, many cases are pending before the Australian court where allegations have
been made against the directors and they have failed to perform their fiduciary duties effectively.

3COMPANY LAW
Australian Securities and Exchange Commission is the main authority who inspects the work of
the directors and in case of any adverse situation; they filed case against the directors of the
company (Clarke, Thomas 2015). They are empowered to do so by the Government of Australia.
According to section 180 of the Corporation Act, every directors are required to perform their
acts with due diligence and they will take proper care in case of dealing with the shareholders. In
the case of ASIC v Cassimetis [2012], the court has been held that the primary duty of the
directors is to help the shareholders and act to secure their interest. If the directors have failed to
do it, they will be held liable and will be punished accordingly. The directors, being the mind of
the company, are required to act carefully and they should not deceive the shareholders for
gaining illegal profit. The same principle has been followed in the case of Regal (Hastings) Ltd
v Gulliver [1942] UKHL 1. It has been observed by the court that the directors must show
loyalty as the reputation of the company is depended on them and in case they are held liable for
wrongful act, the names of the company will get bad. Further, it has been held in Australian
Securities and Investments Commission v Adler (2002) 168 FLR 253, no directors are allowed
to use their post illegally and they should act in a proper way. According to section 182 of the
Corporation Act, the company directors must not misuse their power and they should not leak
any information that are confidential in nature. Further it has been mentioned in ASIC
v Vizard [2005] FCA 1037; (2005) 145 FCR 57 that the directors of the company are liable for
the profit of the company and they are restricted by the law to act in any improper way for the
same.
It has also been mentioned under the Corporation Act that the directors should have to
discharge their duties for the interest of the directors. They could not take the plea that they have
also suffered loss due to any act and the directors should have to inform the shareholders

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